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June 12, 2013  Wed 12:20 PM CT

SIRI: SEE CHART GET CHAIN FIND STRATEGIES
A huge bearish position is targeting Sirius XM Radio.

optionMONSTER systems show that a trader sold 50,000 June 3.50 puts for $0.23 in one block against open interest of 59,031. In the following seconds, 150,000 July 3 puts were bought for $0.06. This is clearly a new position, as open interest in the strike was just 922 contracts before the trade appeared.  

This is very likely a roll of the put position, with the trader selling in-the-money contracts that are about to expire and buying new ones at a lower strike and a later date. He or she is able to take money off the table in the process while still tripling the size the position and looking for the stock to fall from current levels. (See our Education section)

SIRI is down 2.1 percent to $3.27 in afternoon trading. The satellite-radio operator was up at $3.63 at the end of May but below $3 in late April and $2 a year ago.

More than 210,000 SIRI options have already traded today, compared to a daily average of just 15,378 in the last month. 
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Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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